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The state fares better in 2008 than most of the U.S., but experts say unemployment figures suggest that will be hard to sustain.

By ANN S. KIM, Staff Writer March 25, 2009

The recession took a toll on personal income growth last year, but Maine fared better than much of the nation. Both the state and nation, however, lost ground during the fourth quarter.

Total personal income was down nationally and in Maine by the same amount – 0.2 percent – in the final three months of 2008, according to preliminary estimates released Tuesday by the U.S. Bureau of Economic Analysis. It was the first national decline since the first quarter of 1994 and reflected the deepening recession.

But Maine ranked high in terms of per-capita income growth over the entire year. Its growth rate of 4.1 percent was ninth-best in the nation and the highest in New England. The national rate was 2.9 percent.

"Certainly compared to other states and where we could be, Maine's OK," said Michael LeVert, Maine's state economist.

The growth helped Maine gain on other states in per-capita income, although it still is comparatively low at $35,381. The state ranked 33rd nationally in per-capita income, which ranged from a high of $56,248 in Connecticut to a low of $29,569 in Mississippi. Maine's per-capita income remained the lowest in New England.

The income figures offer a window into how the state and country have fared since the onset of the recession in December 2007.

And the numbers show the recession didn't catch up with Maine until the fourth quarter, after hitting other states earlier, said Charles Colgan, chairman of the state's Consensus Economic Forecasting Commission.

"Maine probably will continue to stay in the middle of the pack. But with everybody getting worse, that's not all that great," said Colgan, who is also a public policy and management professor at the University of Southern Maine's Muskie School of Public Service in Portland.

Personal income statistics are not released as quickly as unemployment rates, and recent unemployment increases suggest personal income will fall this year.

"It will continue to decline. That's pretty much a foregone conclusion, given the job losses we've seen," said Beata Caranci, economic forecasting director for TD Bank, the Toronto-based parent of TD Banknorth.

The state unemployment rate of 7.8 percent in January, the latest month for which figures are available, was a 16-year high.

Colgan said it was unlikely Maine would remain New England's leader in personal income growth, given that its unemployment rate is higher than others in the region.

"I don't see us sustaining that," he said.

Total compensation of employees in Maine increased 3.6 percent in 2008, to $28.7 billion from $27.7 billion.

Compensation in government and government enterprises, the largest category of those used by the Bureau of Economic Analysis, grew to $6.1 billion, up 2.9 percent from the year before. The category includes military and civilian jobs in federal, state and local government.

Compensation in health care and social assistance, the second-largest classification, rose to $4.6 billion, up 5.5 percent.

In manufacturing, compensation increased to $3.5 billion, or 3 percent. Within that category, durable goods manufacturing was up 5.5 percent, and nondurable goods manufacturing was up slightly at 0.4 percent.

Compensation in retail trade was up 1.3 percent to $2.5 billion.

For many sectors, the increase was outstripped by inflation of 3.3 percent last year, Caranci said.

"That means they actually had a decline in their real income, so they could buy less," she said.

The composition of Maine's industries also may have helped the state better weather the second half of 2008 than the nation, she said. Maine has a smaller percentage of its work force in the vulnerable manufacturing sector, for example, and a higher proportion in the still-growing health and education sectors.

Staff Writer Ann S. Kim can be contacted at 791-6383 or at:

akim@pressherald.com